FTC Settlement Closes DNC Fraud Case

The Federal Trade Commission said yesterday that it settled with the two remaining defendants in a fraud case involving the national do-not-call registry.

According to the FTC, the defendants, who were officers of Telephone Protection Agency, Hickory, NC, started calling consumers in November 2001, offering to add them to the Federal Communications Commission's DNC list. At the time, however, the FCC had no DNC list, and the company charged as much as $99.95 for a year of service, the FTC said.

The FTC's original complaint charged Telephone Protection Agency and Alex McKaughn, Robert Thompson and Rebecca Phillips with violating the FTC Act and the Telemarketing Sales Rule.

Yesterday, the FTC said the court order banned McKaughn, the company's controller and secretary, from all telemarketing activities and prohibited him from misrepresenting the nature of any telemarketing-reduction or privacy-protection services he may offer in the future through any means. He also is prohibited from billing consumers without first getting their express written authorization.

The default judgment against Thompson, who was vice president at TPA, bans him from telemarketing or helping anyone else engaged in telemarketing activities. It contains a $672,717 monetary judgment and prohibits him from making several other marketing misrepresentations.

The FTC did not fine McKaughn but said it can reopen the matter if he is found to have misrepresented his financial condition. If so, he would be fined $672,717.

The stipulated order is for settlement purposes and does not constitute an admission of a law violation by the defendants. The claims against TPA and Phillips, who was the company's president, were settled last year.